HARRISONBURG -- The state Senate's chief budget writer had a basic message about more tax relief at the Senate Finance Committee's annual retreat: No.
Not if that means ongoing measures, said Senate Finance Committee chair Louise Lucas, D-Portsmouth.
Asked if that could leave open a one-time tax break, like the $110 rebate for single filers and $220 for joint filers that the General Assembly approved in 2019, she said maybe.
"That's something that we need to talk through to see what we can do," Lucas said. "Right now, we just don't know."
It's a thin - a very thin - opening of the door for the budget priority that always tops Gov. Glenn Youngkin's list.
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"We've done it before," said state Sen. Mark Obenshain, R-Harrisonburg, when asked if a tax rebate might be point of compromise for General Assembly budget writers and the governor.
"Returning taxpayers' money is a top priority for me," he said. "We'll have to see."
"Maybe," said state Sen. Creigh Deeds, D-Charlottesville. "But we've got a lot to pay for and when I look ahead to 2027, I want to be sure we're in shape."
"Targeted, one-time tax relief might be OK," he said.
Youngkin has signaled that he intends to seek additional tax cuts in the revised two-year budget he will introduce on Dec. 18.
One-time spending was the theme Lucas stressed several times during the retreat at the Hotel Madison in Harrisonburg.
That's because, buried in the finance committee staff's financial projections, is a bit of a fiscal time bomb.
Committee staff forecast the state's tax and fee revenue this year will be a hefty $31.69 billion. That's nearly $2 billion more than the current two-year budget assumes, and it comes on top of the staff calculation that the adjusted balances left over from the June 30 end of fiscal year 2025 will be $3.42 billion.
"It's like every year: they tell us, we've got money, you can't spend it," grumbled state Sen. Bill Stanley, R-Franklin.
The problem is, this year's spending, once several mandatory items including a big supplement for Medicaid, are added in, totals a lot more: $32.88 billion, the staff calculates.
That means using a chunk of the fiscal 2024 balance to pay this year's bills.
It also means budget-writers will be left with about $2.23 billion for any additional spending they might want to do - whether that's tax relief, or the increased spending on schools and child care that are priorities for many legislators, including state Sen. Ghazala Hashmi, D-Chesterfield.
"I don't see a surplus at all, I see a lot of underfunded needs," said Hashmi, who is among the candidates seeking the Democratic nomination for lieutenant governor.
There are a lot of claims on that $2.23 billion already.
Finance committee staff have tallied $1.85 billion for big construction projects, $350 million for highways and other transportation projects, $150 million for preventing flooding and $116 million for bonuses for teachers and state employees - all the kind of one-time spending Lucas said needs to be the focus in the 2025 session.
But senators have also been talking about additions to already budgeted ongoing spending. That includes:
$75 million for some of the public school funding changes the Joint Legislative Audit and Review Commission has recommended$122 million for 1% raises for teachers and state employees$27 million for state employees' health insurance$28.5 million for home health aides$28.2 billion for mental health crisis servicesup to $35.4 million to clean up the finances of the Virginia Department of Health
Even if tax and fee revenue rises in line with the staff's forecast for fiscal year 2026, there won't be much left, perhaps as little $289 million to cover any supplements to 2026 spending - the kind of last-minute additions covered in every session's so-called "caboose bill" intended to make sure the state can pay its bills for the final six months of its two-year financial cycle.
That's what could leave 2027 in the kind of difficulty that Deeds is worried about.
It's also why Senate Majority Leader Scott Surovell, D-Fairfax, another member of the finance committee, was adamant when asked if a rebate might be a way to compromise on Youngkin's push for tax relief.
"No. We have too many unfunded needs," he said, pointing to state support for public schools and a $20 billion unfunded liability for the state pension plan.
"What's $200 really going to mean to people?" he said. "It's good politics but it's bad fiscal policy from the governor ... he never stops campaigning."
Dave Ress (804) 649-6948
Dave Ress
State Politics / Growth and Development Reporter
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